Dividend Reinvestment Plan (DRIP)

Allows stockholders to automatically purchase shares of common stock of the paying company in lieu of receiving cash dividends.  There are two types of plans --one involves only stock that is already outstanding, while the other involves newly issued stock.  In the first type, the dividends of all participants are pooled and the stock is purchased on the open market.  Participants benefit from the lower transaction costs.  In the second type, the company issues new shares to the participants.  Thus, the company issues new stock in lieu of the cash dividend.
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